Academic Leadership: The Online Journal Volume 9 Issue 2 Spring 2011 Article 28 4-1-2011 Rediscovering SWOT Analysis: The Extended Version Kwamena Nyarku Gloria Agyapong Follow this and additional works at: https://scholars.fhsu.edu/alj Part of the Educational Leadership Commons, Higher Education Commons, and the Teacher Education and Professional Development Commons Recommended Citation Nyarku, Kwamena and Agyapong, Gloria (2011) "Rediscovering SWOT Analysis: The Extended Version," Academic Leadership: The Online Journal: Vol. 9 : Iss. 2 , Article 28. Available at: https://scholars.fhsu.edu/alj/vol9/iss2/28 This Article is brought to you for free and open access by FHSU Scholars Repository. It has been accepted for inclusion in Academic Leadership: The Online Journal by an authorized editor of FHSU Scholars Repository. academicleadership.org http://www.academicleadership.org/1213/rediscovering-swot-analysis-the- extended-version/ Academic Leadership Journal Rediscovering SWOT Analysis: The Extended Version 1.0 INTRODUCTION SWOT analysis was developed to help companies define their strategies in the context of the ever emerging and competitive business environments. This decision-making tool owes its name to the fact that it examines the strengths and weaknesses within the firm, as well as the opportunities and threats of the external market. According to Meyer (2003), the SWOT analysis suggests that a sound strategy should match the firm’s strengths(S) and weaknesses (W) to the opportunities (O) and threats (T) encountered in the firm’s environment. It is meant to spark strategic insight and distil fragmentary facts and figures into coherent backdrops for strategic planning (Mintzberg, 1994). 2.0 HISTORY OF THE SWOT TOOL SWOT analysis is intended to yield strategic insights however; there are numerous contradictory views on the origin of this useful tool to business practice. The origin is credited to Albert Humphrey, who led a research project at Stanford University in the 1960s and 1970s using data from many top companies to manage change and find out why company planning failed. Humphrey and his research team known as the Team Action Model (TAM) identified a number of key areas and the tool used to explore each of these critical areas was called SOFT analysis. They used the categories “What is good in the present is Satisfactory, good in the future is an Opportunity; bad in the present is a Fault and bad in the future is a Threat.” When Humphrey’s research work was presented to Urick and Orr in 1964 at a Seminar in Long Range Planning at the Dolder Grand in Zurich, Switzerland, they changed the F to a W and called it SWOT Analysis. Urick and Orr then promoted SWOT in Britain. What was necessary was the sorting of the six issues advocated by Humphrey into the programme planning categories of Product (what are we selling?); Process (how are we selling it?); Customer (to whom are we selling it?); Distribution (how does it reach them?); Finance (what are the prices, costs and investments?); and Administration (and how do we manage all this?). These issues make organizations more quantifiable and measurable, responsible teams more accountable and business activities more manageable. The other pivotal part in the process is achieving the commitment from the team(s) involved, which is partly explained in the item summarizing Humphrey’s TAM® model and process. SWOT analysis works best when part of an overall strategy or in a given situation. As far as identifying actions from SWOT issues is concerned, it very much depends on one’s reasons and aims for using it, and also one’s authority to manage others, whom by implication of SWOT’s breadth and depth, is likely to be involved in the agreement and delivery of actions. SWOT is also credited to two Harvard Business School Policy Unit professors – George Albert Smith Jr and C Roland Christiensen during the early 1950s. Kings (2004) also cites Haberberg (2000) as stating that SWOT was a concept used by Harvard academics in the 1960s, and Turner (2002) attributing SWOT to Ansoff (1987), of Ansoff’s Matrix fame. Meanwhile, numerous research works have indicated that SWOT has no documented epistemology. By 2004, SWOT has been fully developed, and proven to cope with today’s problems of setting and agreeing realistic annual objectives without depending on outside consultants or expensive staff resources. 3.0 REVIEW OF RELATED LITERATURE ON THE SWOT ANALYSIS Humphrey’s proposed framework was based on the premise that the final strategy adopted by a company should achieve a ‘fit’ between its internal capabilities (strengths and weaknesses) and the external situation (opportunities and threats). SWOT analysis involves undertaking an analysis of the external environment within which the firm operates and an objective appraisal of the organization’s current position. The tool provides a good framework for reviewing strategy, position and direction of a company or product. It is a traditional means of searching for insights into ways of realizing the desired alignment (e.g., Ansoff 1965; Andrews 1987; Porter 1991; Mintzberg, Ahlstrand, & Lampel 1998). SWOT is promoted as a useful technique in many texts; however, it is not universally praised. Some prefer to think of SWOT as a “Significant Waste of Time” (Hill & Westbrook, 1997). In addition, people who use SWOT might conclude that they have done an adequate job of planning, and ignore such sensible issues as defining the firm’s objectives or calculating Return on Investment for alternate strategies. SWOT should be used in the context of the organization, its goals and market place. However, traditional procedures consist of questions devoid of explicit theoretical underpinnings, (Valentin, 1998; Thompson & Strickland 1998; McDonald, 1999; Kotler, 2000). Menon, Bharadwaj, Adidam and Edison (1999) in their findings showed that the use of this framework harmed performance. When Hill and Westbrook (1997) examined the use of it by 20 companies in the UK in 1993-94, they concluded that the process was so flawed that it was time for “product recall.” Information derived from the SWOT analysis is used to develop specific strategies to exploit environmental opportunities and organizational strengths, neutralise environmental threats, and overcome organizational weaknesses. Some experts suggest that one must first consider outlining the external opportunities and threats before the strengths and weaknesses as the latter are controllable. As Koch (2004) cited, he recognized that a series of SWOT/TOWS analyses had the advantages of a single arbitrary matrix. Wheelen and Hunger (1998) used SWOT to look for gaps and matches between competences and resources and the business environment. Dealtry (1992) considered SWOT in terms of groups and vectors with common themes and interactions. Shinno, Youshioka and Hachiga (2006) amalgamated SWOT analysis with an Analytic Hierarchy Process (AHP) that ranked and prioritized each element using software. Shinno et al., (2006) do not really deal with the obvious limitations of SWOT. Valentin (2001) also looked at SWOT from a resource-based view. Panagiotou (2003) also introduced a TELESCOPIC OBSERVATIONS strategic framework that maps strengths, weaknesses, opportunities and threats against his suggested acronym. T stood for technological advancements; E stood for economic considerations; L for legal requirements etc. Panagiotou’s work does not only recognize the difficulty in finding the origins of SWOT, but also manages to identify some interesting alternatives. This paper also looks at the marketing and strategic choices based view of the SWOT analysis. SWOT offers powerful insights into the potential and critical issues affecting any business into future decision-making. Some existing literature on SWOT makes the technique look too simple by just identifying favourable and unfavourable internal and external variables. It fails to share light on how the identifying favourable and unfavourable internal and external variables. It fails to share light on how the variables are to be identified or classified correctly but are usually fortified with checklist that determine innumerable factors that might affect a business. Others also see it as including checklists intended to facilitate SWOTs and their strategic implications. They explain how the strengths may be leveraged to realize the opportunities and how weaknesses, which exacerbate threats or impede progress, may be overcome (e.g., Hofer & Schendel, 1978; Schnaars, 1998; Thompson & Strickland, 1998; McDonald, 1999; Kotler, 2000). Valentin (2001) provided a conceptual foundation of a better approach to the SWOT analysis called the Resourced-based SWOT analysis. His model focuses on systematic causal issues that afford more perceptive, reliable, and actionable insights. It is grounded in contemporary strategic management and marketing theory, especially the resource-based view of the firm (e.g. Harper, 2010; Werner, 1984; Conner, 2001; Amit & Schoemaker, 1993; Peteraf, 1993; Hunt, 2000). The resource-based SWOT draws notably from two complementary frameworks, Porter’s (1980) acclaimed competitive forces model, and Brandenburger and Nalebuff’s (1996) value net. Valentin (2001) further argues that every firm is a unique bundle of resources that determines which external circumstances afford opportunities and which poses threats. Comparative advantages and disadvantages in resources are tantamount to strengths and weaknesses that engender cost and differentiation advantages